Minor League Contract FAQs
With Gerrit Cole and Josh Bell both receiving minor league contracts from the Pittsburgh Pirates, I figured this would be a perfect time to dust off the old “What’s the difference between a minor league contract and a major league contract” post.
NOTE: All examples use Gerrit Cole, but they all apply to Josh Bell, except when noted.
1. The Pirates paid Gerrit Cole $8 M. Trevor Bauer got a four year contract. How many years does Cole’s contract cover?
There are two types of contracts that can be issued during the draft: a standard minor league contract, and a major league contract. The minor league contract just pays a straight bonus, and this is what Cole received. His bonus will likely be split up between two seasons, which is also standard (although minor league bonuses can’t be split up in to any more than two payments, unless the player is a two-sport athlete).
Bauer got a four year contract because he signed a major league deal. The contract pays him a bonus ($3.4 M in Bauer’s case), plus it gives him guaranteed salaries in his first four years, which are much higher than what he normally would receive. It also speeds up his path to the majors.
So how long is Cole signed for? Here is a breakdown of the maximum amount of time that Cole, signed in 2011, can be under the Pirates’ control:
2012-2014: Minor League Contract, has to be added to the 40-man roster no later than November 20, 2014, or risk being selected in the 2014 Rule 5 draft.*
2015: First year on the 40-man roster.
2016: Second year on the 40-man roster.
2017: Third year on the 40-man roster.
2018: Out of options, has to be added to the major league roster for good at the start of the 2018 season, or be designated for assignment.
2018-2020: League minimum years.
2021-2023: Arbitration years.
2024: Eligible for free agency.
*Note that this is the timeline for Cole, a college school draftee. A player drafted out of high school in 2011, such as Josh Bell, would be eligible for the 2015 Rule 5 draft, adding an extra year to the process.
The maximum control that this bonus pays for is 13 years, although it would be an extreme disappointment if Cole isn’t in the majors by 2018. The main difference between Cole and Bauer is that Bauer received a major league deal, which means he skips the minor league contract portion and jumps to his first year on the 40-man roster right away. He also has his league minimum contracts with guaranteed salaries, likely to be slightly more than what the normal player would receive. The main benefit, though, is the quicker path to the majors, as the maximum Bauer would be in the Arizona system is ten years.
2. Is the bonus Cole received his salary throughout his minor league career?
Cole’s signing bonus was just that: the bonus he received to sign with the team. From there he is under a minor league contract, until the point he gets added to the 40-man roster. The details of individual minor league deals are unknown, but players usually get a set amount per month, and only get paid during the months of the regular season. That set amount is usually something like $1,000, which means a minor league player will make $6,000 a year. This is part of the reason why teams have to pay out such big signing bonuses to prep players.
Cole’s minor league contract could pay more than that, but probably not much more. From there, Cole’s next step would be the 40-man roster. Cole might not spend any time in the minors on the 40-man roster, as he might just have his contract purchased one day down the line (2013-2014), and go to the majors. If he did spend time in the minors, while on the 40-man roster (similar to what players like Bryan Morris and Gorkys Hernandez are doing now), he would receive the following pay scale:
-$32,500 his first year in the minors on the 40-man roster
-$67,300 his second year in the minors on the 40-man roster
-$97,500 his third year in the minors on the 40-man roster
Those numbers are based on this year’s salary structure. They could change by the time Cole is added to the 40-man. Once Cole is called up, he’s eligible for standard major league contracts: league minimum pay in his first three years of service time, and arbitration in years 4-6, then eligible for free agency after six years of service time. Cole also has a clause in his deal that could earn him more money if he’s called up by 2013, so he probably won’t receive the basic league minimum in his first few years.
3. Trevor Bauer signed a four year major league deal. Pedro Alvarez also received a major league deal in 2008. Does that mean he’s a free agent when that deal is up?
The major league deal just outlines what the salaries will be during the duration of that deal. In the case of Alvarez, he received $88,750 in 2009, when he normally would have received $32,500. In 2010 he received $88,750 in the minors, rather than the normal $65,000, and received $500,000 in the majors, rather than the normal $400,000. This year he has received $550,000 in his time in the majors, which is more than what he probably would have received under a normal scale ($420,000). He also received $88,750 in the minors. Here is what he would receive in the remaining years of the deal:
2012: $700,000 (Normal: $440,000)
2013: $700,000 club option (Normal: $460,000)
2014: $700,000 club option (Normal: Arbitration eligible)
Alvarez has a clause in his contract that allows his to void his 2013 option if he’s arbitration eligible, although he won’t be eligible until the 2014 season. I’m assuming the same clause exists for the 2014 season, so we’ll assume he becomes arbitration eligible that year. The major league contract, from 2009-2013, gives Alvarez an additional $755,833 over what he normally would have made during that time (and the 2011-2013 “normal” prices are estimates).
So what happens in 2014 when his contract runs out? Nothing out of the ordinary. Alvarez would follow the normal cycle. In 2014, assuming the option would be voided, he would become arbitration eligible for the first time. From there, he’d have two remaining years of control (2015, 2016) before he could be free agent eligible for the 2017 season. The main benefit of the major league deal is that it gets the player to the majors quicker. There is some financial gain, but it’s minimal in the long run. When the initial deal is up, the player still has to follow the same basic MLB contract rules, which means he can’t become a free agent until after six years of major league service time.
4. Does a player have to be removed from the 40-man roster to make room for Cole?
No. The only way a player needs to be removed from the 40-man roster is if the Pirates sign a player to a major league deal. Cole received a minor league deal, which basically means that, outside of the massive price differences, there’s no difference between his deal and the deal given out to 41st round pick Jonathan Schwind, for example.